BT cuts long-distance calls by up to 25%

THE cost of national long-distance calls is being cut by up to a quarter by BT from 29 September, lowering annual telephone bills by pounds 244m.

The changes are part of price reductions of pounds 400m that BT must make under the price cap imposed by Oftel, the industry regulator.

Mercury, BT's main rival, said it would also cut long-distance call charges from the same date.

The effect of BT's cuts for residential customers will be a saving of pounds 6, excluding VAT, on an annual average call bill of pounds 164. Businesses will save typically pounds 20 a line a year as a result of the cut.

Until now, BT has had two price bands for calls made over distances of 35 miles or more, with almost all call routes falling into the higher band. The higher band will be scrapped, generating savings on those call routes of up to 25 per cent.

Don Cruickshank, director-general of Oftel, welcomed the latest cuts and the simplification of the long-distance price structure. He said people had been unsure whether calls would fall into the higher or lower price band. 'This decision to settle on the cheaper rate will put an end to confusion and benefit all customers.' Mr Cruickshank said BT had announced price reductions with a total value of pounds 350m for the current regulatory year. This is the third price cut announced by BT in the past few weeks. The first - a reduction worth pounds 75m a year in the cost of directory inquiries - takes effect today.

Further price cuts of pounds 50m will be needed to keep BT's overall prices for its basic services within the cap of inflation minus 7.5 percentage points. Some of this reduction is expected to be in the form of a change from the present system of charging for calls by the unit, to charging according to the actual duration of the call.

The Telecommunications Users Association said: 'We look forward to further price reductions due under the 'RPI minus X' formula and the impact on competitive call pricing throughout Britain.' The TUA also called for more simplification of tariffs to help people to understand costs more easily.

Michael Hepher, BT's group managing director, said the latest reductions were made possible by the pounds 20bn modernisation of the network over the past 10 years.

In a separate move, BT said it would stop automatic discounts for business and larger residential customers. Instead, customers would be invited to opt into one of a range of discount schemes that best suited their needs.